1
Exhibit 4(c)
[CONFORMED COPY]
$90,000,000
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
March 28, 1997
among
COVENTRY CORPORATION,
The BANKS Listed Herein
and
XXXXXX GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
2
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.................................................1
SECTION 1.02. Accounting Terms and Determinations; Pooling of
Interests Adjustments............................................12
SECTION 1.03. References to the Convention Statement or to
Statutes and Regulations.........................................13
ARTICLE 2
THE CREDITS
SECTION 2.01. Loans......................................................13
SECTION 2.02. Conversion of Existing Loans...............................13
SECTION 2.03. Notes......................................................13
SECTION 2.04. Maturity of Loans..........................................14
SECTION 2.05. Interest Rates.............................................14
SECTION 2.06. Amendment Fee..............................................14
SECTION 2.07. Mandatory Amortization.....................................15
SECTION 2.08. Optional Prepayments.......................................15
SECTION 2.09. General Provisions as to Payments..........................16
SECTION 2.10. Computation of Interest and Fees...........................17
SECTION 2.11. Withholding Tax Exemption..................................17
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness..............................................17
SECTION 3.02. Effect of Amendment........................................19
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power..............................20
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention....................................................20
SECTION 4.03. Binding Effect.............................................20
SECTION 4.04. Financial Information......................................20
SECTION 4.05. Litigation.................................................21
SECTION 4.06. Compliance with Laws.......................................21
SECTION 4.07. Compliance with ERISA......................................21
SECTION 4.08. Taxes......................................................21
3
PAGE
----
SECTION 4.09. Regulatory Matters.........................................22
SECTION 4.10. Not an Investment Company..................................22
SECTION 4.11. Full Disclosure............................................22
SECTION 4.12. Environmental Matters......................................23
SECTION 4.13. No Default.................................................23
SECTION 4.14. No Burdensome Restrictions.................................23
SECTION 4.15. Use of Tradename...........................................23
ARTICLE 5
COVENANTS
SECTION 5.01. Information................................................23
SECTION 5.02. Payment of Obligations.....................................27
SECTION 5.03. Maintenance of Property; Insurance.........................28
SECTION 5.04. Conduct of Business, Maintenance of Existence
and Ownership of Subsidiaries....................................29
SECTION 5.05. Compliance with Laws.......................................30
SECTION 5.06. Inspection of Property, Books and Records..................30
SECTION 5.07. Debt.......................................................31
SECTION 5.08. Restricted Payments; No Cash Payment of
Subordinated Debt................................................31
SECTION 5.09. Investments................................................32
SECTION 5.10. Negative Pledge............................................33
SECTION 5.11. Operating Margin...........................................34
SECTION 5.12. Consolidations, Mergers and Sales of Assets................34
SECTION 5.13. Use of Proceeds............................................34
SECTION 5.14. Subordinated Debt and Equity Securities....................34
SECTION 5.15. Transactions with Affiliates...............................34
SECTION 5.16. Other Agreements...........................................35
SECTION 5.17. Capital Requirements.......................................35
SECTION 5.18. Minimum Net Worth..........................................35
SECTION 5.19. Acquisitions...............................................35
SECTION 5.20. Tax Refund.................................................35
SECTION 5.21. Adoption of Management Incentive Plan......................36
SECTION 5.22. Certain Transactions Permitted.............................36
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default..........................................37
SECTION 6.02. Notice of Default..........................................40
ii
4
PAGE
----
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization..............................40
SECTION 7.02. Agent and Affiliates.......................................40
SECTION 7.03. Action by Agent............................................40
SECTION 7.04. Consultation with Experts..................................40
SECTION 7.05. Liability of Agent.........................................40
SECTION 7.06. Indemnification............................................41
SECTION 7.07. Credit Decision............................................41
SECTION 7.08. Successor Agent............................................41
SECTION 7.09. Agent's Fee................................................41
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices....................................................42
SECTION 8.02. No Waivers.................................................42
SECTION 8.03. Expenses; Documentary Taxes; Indemnification...............42
SECTION 8.04. Reduced Returns............................................43
SECTION 8.05. Set-Offs...................................................43
SECTION 8.06. Amendments and Waivers.....................................44
SECTION 8.07. Successors and Assigns.....................................44
SECTION 8.08. Collateral.................................................46
SECTION 8.09. GOVERNING LAW; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL...............................46
SECTION 8.10. Counterparts; Integration..................................46
SECTION 8.11. Coventry Security Documents................................47
SECTION 8.12. Confidentiality............................................47
iii
5
PAGE
----
EXHIBIT A Note
EXHIBIT B-1 Opinion of Bass, Xxxxx & Xxxx
EXHIBIT B-2 Opinion of Xxxxxxx X. Xxxxx, Corporate
General Counsel
EXHIBIT C Opinion of Xxxxx Xxxx & Xxxxxxxx, Special
Counsel for the Banks and the Agent
EXHIBIT D Consent of Certain Loan Parties
EXHIBIT E Assignment and Assumption Agreement
iv
6
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 28, 1997
among COVENTRY CORPORATION, a Delaware corporation (the "BORROWER"), the BANKS
listed on the signature pages hereof and XXXXXX GUARANTY TRUST COMPANY OF NEW
YORK, as Agent (the "AGENT").
WITNESSETH:
WHEREAS, the Borrower, the Banks listed on the signature pages hereof
and the Agent are parties to a Second Amended and Restated Credit Agreement
dated as of November 20, 1992 (as amended to the Effective Date (as defined
below), the "ORIGINAL AGREEMENT"); and
WHEREAS, pursuant to the Security Documents (as defined in the Original
Agreement), the obligations of each Loan Party (as so defined) are guaranteed by
certain other Loan Parties and secured by Liens (as so defined) on the
Collateral (as defined in such Security Documents); and
WHEREAS, the parties hereto wish to modify the Original Agreement by,
among other things, amending certain of the covenants contained therein,
modifying the amortization schedule of the Loans (as defined below) and
modifying certain provisions relating to interest on the Loans (as defined
below);
NOW, THEREFORE, the parties hereto hereby agree that, on and as of the
Effective Date, the Original Agreement is hereby amended and restated in its
entirety as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ACCEPTABLE INSURER" means an insurance company (i) having an A.M. Best
rating of "A-" or better or (ii) otherwise reasonably acceptable to the Agent
and the Required Banks.
7
"ACQUISITION" means any acquisition, whether in a single transaction or
series of related transactions, by the Borrower or any one or more Subsidiaries,
or any combination thereof of (i) all or a substantial part of the assets of any
Person, or of any business segment or business unit of any Person, whether
through purchase of assets or securities, by merger or otherwise, (ii) control
of at least a majority of securities of a corporation or other Person having
ordinary voting power in the election of directors or (iii) control of a greater
than 50% ownership interest in any partnership, joint venture or other Person.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, the
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"ADMITTED ASSETS" means, (i) with respect to CHLIC, assets which are
"admitted assets" under Article 3.33 of the Texas Insurance Code and the rules
and regulations promulgated by the Texas Insurance Department thereunder, and
(ii) with respect to any HMO Company subject to regulation by a state department
of insurance or similar governmental agency, assets which are "admitted assets"
(or any substantially similar concept) under the relevant provisions of the
state insurance or health maintenance organization laws and the rules and
regulations promulgated thereunder.
"AFFILIATE" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person") or
(ii) any Person (other than a Loan Party) which is controlled by or is under
common control with a Controlling Person. As used in this definition, the term
"control" means possession, directly or indirectly, of the power either to (i)
vote 10% or more of the securities having ordinary voting power for the election
of directors of such Person or (ii) direct or cause the direction of the
management or policies of a Person, whether by contract or otherwise; provided
that in no event shall the Agent or any Bank or any of their respective
affiliates be deemed to be an Affiliate.
"AGENT" means Xxxxxx in its capacity as agent for the Banks hereunder,
and its successors in such capacity.
"AGREEMENT" means the Original Agreement as amended and restated by
this Amended Agreement and as the same may be further amended or restated from
time to time in accordance with the terms hereof.
"AHERF TRANSACTION" means (i) the sale of PGMA and certain other
physician practices to Allegheny Health, Education and Research Foundation
("AHERF") pursuant to an Asset Purchase Agreement dated as of February 26, 1997
between HealthAmerica
2
8
and AHERF, and (ii) the Risk Sharing Agreement to be entered into between
HealthAmerica and AHERF at the closing of the sale referred to in clause (i).
"AMENDED AGREEMENT" means this Third Amended and Restated Credit
Agreement dated as of March 28, 1997 among the Borrower, the Banks and the
Agent.
"AMORTIZATION DATE" means each of June 30, 1997, September 30, 1997,
December 31, 1997 and April 1, 1998.
"ASSET SALE" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation) by the Borrower or
any of its Subsidiaries of any asset, including without limitation any
sale-leaseback transaction, subsequent to the Effective Date, but excluding (i)
dispositions in the ordinary course of business, (ii) dispositions to the
Borrower or a Wholly-Owned Subsidiary of the Borrower, (iii) cash payments
otherwise permitted under this Agreement and (iv) a disposition of an asset
pursuant to a sale-leaseback transaction consummated within one year of the
acquisition or completion of construction thereof in order to finance the cost
thereof.
"ASSIGNEE" has the meaning set forth in Section 8.07(c).
"BANK" means each financial institution listed on the signature pages
hereof, each Assignee which becomes a Bank pursuant to Section 8.07(c), and
their respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day or (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"BENEFIT ARRANGEMENT" means an employee benefit plan within the meaning
of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which
is maintained or otherwise contributed to by any member of the ERISA Group.
"BJC TRANSACTION" means the sale of the GHP Healthcenters to BJC Health
System ("BJC") pursuant to an Asset Purchase Agreement dated as of March 11,
1997 between GHP and BJC and (ii) the Global Capitation Agreement executed March
12, 1997 between GHP (on behalf of itself and HCUSA-MO) and BJC.
"BORROWER" means Coventry Corporation, a Delaware corporation, and its
successors.
3
9
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"BUSINESS PLAN" means Coventry's 1997 Business Plan, dated March 6,
1997 and revised March 13, 1997, which was furnished to the Banks prior to the
date hereof.
"CHC FINANCIAL" means CHC Financial, Inc., a Tennessee corporation,
and its successors.
"CHDC" means Coventry Healthcare Development Corporation, a Delaware
corporation, and its successors.
"CHLIC" means Coventry Health and Life Insurance Company, a Texas
corporation, and its successors.
"CHMC" means Coventry Healthcare Management Corporation, a Delaware
corporation, and its successors.
"CHMC-VA" means Coventry HealthCare Management Corporation, formerly
known as Southern Healthcare Management Corporation, a Virginia corporation, and
its successors.
"CHP" means Coventry HealthPlan of Pennsylvania, Inc., a Pennsylvania
corporation.
"CHWP" means Coventry HealthPlan of Western Pennsylvania, Inc., a
Pennsylvania corporation.
"CHWV" means Coventry HealthPlan of West Virginia, Inc., a West
Virginia corporation.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"CONVENTION STATEMENT" means each financial statement which CHLIC
submits to the Texas Insurance Department in the same form as the financial
statements referred to in Section 4.04(b), as such form may be amended from time
to time pursuant to the requirements of the Texas Insurance Department.
4
10
"CONVERTIBLE EXCHANGEABLE SUBORDINATED DEBT" means Convertible
Exchangeable Subordinated Debt of the Borrower issued pursuant to the Warburg
Pincus Transaction in the amount and on the terms specified in the March 14,
1997 letter agreement with Warburg Pincus & Co. LLC and having subordination
terms reasonably satisfactory to the Banks and other terms reasonably
satisfactory to the Required Banks.
"COVENTRY GROUP" means, collectively, the Borrower and its Subsidiaries
and PGMA.
"COVENTRY PLEDGE AGREEMENT" means the Amended and Restated Coventry
Pledge Agreement dated as of November 20, 1992 between the Borrower and the
Agent, as the same may be amended from time to time.
"COVENTRY SECURITY AGREEMENT" means the Amended and Restated Coventry
Security Agreement dated as November 20, 1992 between the Borrower and the
Agent, as the same may be amended from time to time.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable, claims payable and expense accruals
arising in the ordinary course of business, (iv) all obligations of such Person
as lessee which are capitalized in accordance with generally accepted accounting
principles, (v) all obligations of such Person to purchase securities (or other
property) which arise out of or in connection with the sale of the same or
substantially similar securities or property, (vi) all non-contingent
obligations (and, for purposes of Sections 5.10 and 6.01, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under letters of credit or similar instruments, (vii) all Debt of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person, and (viii) all Debt of others Guaranteed by such
Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"EFFECTIVE DATE" means the date this Amended Agreement becomes
effective in accordance with Section 3.01.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements
5
11
or other governmental restrictions relating to the environment, the effect of
the environment on human health, or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or the clean-up or other remediation thereof.
"EQUITY SECURITIES" means any capital stock or other equity security,
or any warrant or other right to purchase such an equity security, issued by any
Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING LOANS" means the loans outstanding under the Original
Agreement, as of the Effective Date before giving effect to the amendment
effected hereby.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to Xxxxxx
on such day on such transactions as determined by the Agent.
"FINANCING DOCUMENTS" means this Agreement, the Notes and the Security
Documents.
"GHP" means Group Health Plan, Inc., a Missouri corporation, and its
successors.
6
12
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part); provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"GUARANTY AND SECURITY AGREEMENT" means the Amended and Restated
Guaranty and Security Agreement dated as of November 20, 1992 among PGC,
Healthpass, CHMC, CHMC-VA, CHP, SHBS, CHC Financial, Coventry Healthcare
Properties, Inc., Coventry Healthcare Physician Management, Inc., CHDC, PHUSA,
the Agent and, from and after the time any other Subsidiary becomes a Pledgor
under the terms of the Guaranty and Security Agreement, as contemplated by
Section 5.04(e) hereof, such other Subsidiary, as the same has been or may be
amended from time to time.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"HEALTH SERVICES ENTITY" means any corporation or other entity
principally engaged in the business of the provision and/or administration of
healthcare services through healthcare providers and activities incidental or
related thereto and consistent therewith, including, but not limited to, the
health indemnity, HMO and preferred provider organization businesses.
"HEALTHAMERICA" means HealthAmerica Pennsylvania, Inc., a Pennsylvania
corporation, and its successors.
"HEALTHPASS" means Healthpass, Inc., a Pennsylvania corporation, and
its successors.
"HCUSA" means HealthCare USA, Inc., a Florida corporation, and its
successors.
7
13
"HCUSA-MIDWEST" means HealthCare USA - Midwest, Inc., a Delaware
corporation.
"HCUSA-MO" means HealthCare USA of Missouri, LLC., a Missouri limited
liability company, and its successors.
"HMO COMPANIES" means HealthAmerica, GHP, HCUSA, HCUSA-MO, SHS, CHWV,
Riverside Health Plan, Inc., CHWP and any other Loan Party operating as a health
maintenance organization or regulated as such.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"LENDING OFFICE" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its "Domestic Lending Office" or "Lending
Office") or such other office as such Bank may hereafter designate as its
Lending Office by notice to the Borrower and the Agent.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Loan Party shall be deemed to own subject
to a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"LOANS" means the Existing Loans as converted pursuant to Section 2.02
of this Amended Agreement.
"LOAN PARTY" means any member of the Coventry Group.
"MATERIAL DEBT" means Debt (other than the Notes) of one or more Loan
Parties, arising in one or more related or unrelated transactions, in an
aggregate principal amount exceeding $2,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
unfunded liabilities in excess of $2,000,000.
"XXXXXX" means Xxxxxx Guaranty Trust Company of New York, and its
successors.
8
14
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NET CASH INVESTMENTS" means, for any period, cash and cash equivalents
invested in a Person during such period, minus any dividends or other cash or
cash equivalents received in respect of Investments in such Person during such
period.
"NET CASH PROCEEDS" means, with respect to any transaction, an amount
equal to the cash proceeds, as and when received by the Borrower or any of its
Subsidiaries, from or in respect of such transaction (including any cash
proceeds received as income or other proceeds of any noncash proceeds of any
Asset Sale), less (x) any expenses reasonably incurred by such Person in respect
of such transaction, (y) the amount of any Debt secured by a Lien on an asset
subject to an Asset Sale and discharged from the proceeds of such Asset Sale;
and (z) any taxes paid or payable by such Person (as estimated by the chief
financial officer) in respect of any Asset Sale.
"NET WORTH" means, at any date, the total stockholders' equity of the
Borrower and its Consolidated Subsidiaries as of such date.
"NON-ADMITTED ASSETS" means, with respect to CHLIC or any HMO Company,
assets which are not Admitted Assets with respect to CHLIC or such HMO Company,
as the case may be.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"OPERATING EARNINGS" for a period means the amount that would be
classified as such in the Borrower's consolidated statement of earnings for such
period, excluding, however, capital gains from the AHERF Transaction and the BJC
Transaction.
"OPERATING MARGIN" for a period means (x) Operating Earnings divided by
(y) Total Operating Revenues for such period, expressed as a percentage.
"ORIGINAL AGREEMENT" has the meaning set forth in the recitals to this
Amended Agreement.
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
9
15
"PARTICIPANT" has the meaning set forth in Section 8.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PGC" means Penn Group Corporation, a Delaware corporation, and its
successors.
"PGMA" means Penn Group Medical Associates, Inc., a Pennsylvania
professional corporation, and its successors.
"PHUSA" means Pennsylvania HealthCare USA, Inc., a Pennsylvania
corporation.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PRIME RATE" means the rate of interest publicly announced by Xxxxxx in
New York City from time to time as its Prime Rate.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time (a) with respect to matters
addressed in Section 5.19 or 5.22 or the definition of "AHERF Transaction," "BJC
Transaction" or "Convertible Subordinated Debt," including any amendment or
modification of any provision thereof, Banks having at least 75% of the
aggregate principal amount of the Loans, and (b) with respect to all other
matters, at least two Banks having at least 66 2/3% of the aggregate unpaid
principal amount of the Loans (or, in either case, if there is only one Bank,
such Bank).
10
16
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of capital stock issued by any Loan Party (except dividends payable
solely in shares of its capital stock) or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of capital
stock issued by any Loan Party or (b) any option, warrant or other right to
acquire shares of capital stock issued by any Loan Party; provided that any
Investment by a Loan Party in another Loan Party pursuant to 5.09(a) shall not
be a Restricted Payment.
"SECURITY DOCUMENTS" means the Coventry Pledge Agreement, the Coventry
Security Agreement and the Guaranty and Security Agreement.
"SHBS" means Southern Health Benefit Services, Inc., a Virginia
corporation.
"SHS" means Southern Health Services, Inc., a Virginia corporation.
"SSM" means Specialty Services of Missouri, Inc., a Missouri
corporation.
"STATUTORY CAPITAL AND SURPLUS" means, at any time, the amount which is
(or would be) set forth under the caption "Total" of common and preferred
capital stock and surplus on line 38 of a Convention Statement of CHLIC prepared
as of such date.
"SUBORDINATED DEBT" means any Debt of the Borrower which is
subordinated in right of payment of principal, interest and other amounts to the
payment of principal of and interest on the Loans and other amounts payable by
the Borrower under the Financing Documents pursuant to subordination provisions,
and containing such other terms and provisions, which are acceptable to the
Required Banks.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person or one or more of its Subsidiaries; unless otherwise specified
herein, "Subsidiary" shall mean a Subsidiary of the Borrower.
"TEMPORARY CASH INVESTMENT" means (a) any Investment by a Loan Party in
(i) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, (ii)
commercial paper rated at least A-1 by Standard & Poor's Corporation and P-1 by
Xxxxx'x Investors Service, Inc., (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized under the laws of the United States
or any state thereof and has capital, surplus and undivided profits aggregating
at least $300,000,000; provided in each case that such Investment matures within
one year from the date of acquisition thereof by such Loan Party and (iv)
investments in money
11
17
market mutual funds acceptable to the Agent; and (b) any repurchase agreement
relating to an Investment of the type described in clause (a)(i) above, provided
that (i) the counterparty thereto is a government securities dealer designated
by the Federal Reserve Bank of New York as a "reporting dealer" and whose
financial statements indicate that it has capital of at least $50,000,000, (ii)
the Investments which are the subject of such repurchase agreement shall be at
all times during the term of the repurchase agreement in the possession of such
Loan Party (or the Agent) or the interest of such Loan Party therein shall be
appropriately recorded in accordance with United States federal regulations
regarding book-entry Treasury securities, (iii) the fair market value, including
accrued interest, of the Investments subject to such repurchase agreement and of
any additional collateral securing the obligation of the other party under such
repurchase agreement in which such Loan Party has a perfected security interest
shall not at any time be less than 105% (or, in the case of overnight repurchase
agreements, 102%) of the obligation of the counterparty to the repurchase
agreement and (iv) the term of such repurchase agreement shall not exceed 30
days.
"TEXAS INSURANCE DEPARTMENT" means the Department of Insurance of the
State of Texas, acting through, where the context may require, the Commissioner
of Insurance of the State Board of Insurance of the State of Texas.
"TOTAL OPERATING REVENUES" for any period means the amount that would
be classified as such in the Borrower's consolidated statement of earnings for
such period, excluding, however, capital gains from the AHERF Transaction and
the BJC Transaction.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"WARBURG PINCUS TRANSACTION" means the sale by the Borrower to Warburg,
Xxxxxx Ventures, L.P. (or any affiliate) of the Borrower's Convertible
Exchangeable Subordinated Debt and/or Series A Convertible Preferred Stock and
Warrants pursuant to the letter agreement dated March 14, 1997 between the
Borrower and Warburg, Xxxxxx & Co. LLC.
SECTION 1.02. Accounting Terms and Determinations; Pooling of Interests
Adjustments. (a) Unless otherwise specified herein, all accounting terms used
herein shall be interpreted and all accounting determinations hereunder (i) with
respect to the Borrower and its Consolidated Subsidiaries, shall be made, and
all financial statements
12
18
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent consolidated financial
statements of the Borrower delivered to the Banks, (ii) with respect to CHLIC on
a stand alone basis, unless otherwise specified herein, shall be prepared in
accordance with statutory accounting principles prescribed or permitted by Texas
insurance laws and regulations as in effect from time to time, applied on a
basis consistent (except for changes which are disclosed and which are
prescribed or permitted by Texas insurance laws and regulations) with the most
recent annual Convention Statement of CHLIC delivered to the Banks, (iii) with
respect to any HMO Company on a stand-alone basis, unless otherwise specified
herein, shall be prepared in accordance with statutory accounting principles
prescribed or permitted by applicable federal and state insurance and health
maintenance organization laws and regulations as in effect from time to time,
applied on a basis consistent (except for changes which are disclosed and which
are prescribed or permitted by such insurance and health maintenance
organization laws and regulations) with the most recent audited financial
statements of GHP or HealthAmerica, as relevant, delivered to the Banks.
(b) Accounting terms which are underscored refer to amounts which are
(or would in accordance with generally accepted accounting principles be) set
forth under such caption in the consolidated financial statements of the
Borrower and its Consolidated Subsidiaries for the relevant period or at the
relevant date.
SECTION 1.03. References to the Convention Statement or to Statutes and
Regulations. In the event of any amendment to the form of Convention Statement
from that delivered pursuant to Section 4.04(b), or of any amendment to any
statute of the State of Texas or regulation of the Texas Insurance Department,
provisions in this Agreement relating to line items and captions in a Convention
Statement or to such statute or regulation shall be adjusted as the Required
Banks reasonably deem appropriate in order to insure that the operation of the
affected provisions of this Amended Agreement after such amendment is consistent
with their operation prior thereto.
ARTICLE 2
THE CREDITS
SECTION 2.01. Loans. Pursuant to the Original Agreement, each Bank has
outstanding Existing Loans to the Borrower in an aggregate principal amount set
forth opposite such Bank's name on the signature pages hereof.
13
19
SECTION 2.02. Conversion of Existing Loans. On the Effective Date, all
of the Existing Loans shall be converted to Loans bearing interest at a rate
pursuant to Section 2.05. All interest accrued on the Existing Loans as of the
Effective Date shall be due and payable on such date. The Loans will be term
loans; principal amounts prepaid or repaid may not be reborrowed.
SECTION 2.03. Notes. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Lending
Office in an amount equal to the aggregate unpaid principal amount of such
Bank's Loans. Each Note evidencing a Loan shall be exchanged for the note
evidencing the Existing Loan (which shall be marked "canceled" and returned to
the Company) promptly upon receipt by the Bank of the Note.
(b) Upon receipt of the Note of each Bank to be delivered to the Agent
pursuant to Section 3.01(b), the Agent shall mail such Note to such Bank. Each
Bank (including any Bank not referred to in the immediately preceding sentence)
shall record the date, amount and maturity of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and prior to any transfer of its Note shall endorse on the schedule
forming a part thereof appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding; provided that the
failure of any Bank to make any such recordation or endorsement shall not affect
the obligations of the Borrower hereunder or under the Notes. Each Bank is
hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as and
when required.
SECTION 2.04. Maturity of Loans. The Loans shall mature, and the
principal amount thereof and any interest thereon shall be due and payable,
on April 1, 1998.
SECTION 2.05. Interest Rates. (a) Each Loan shall bear interest on the
outstanding principal amount thereof, for each day from the Effective Date until
it becomes due, at a rate per annum equal to the Base Rate for such day plus 2%.
Such interest shall be payable in arrears on the last Business Day of each
month, commencing April 30, 1997. Notwithstanding the foregoing, upon the
occurrence and during the continuance of Event of Default, each Loan shall bear
interest at a rate per annum equal to the sum of 2% plus the rate otherwise
applicable to the Loans for such day, which shall be payable on demand or, if
not demanded, on the last Business Day of each month.
(b) Nothing contained in this Amended Agreement or the Notes shall
require the Borrower to pay interest at a rate exceeding the maximum rate
permitted by applicable law. Neither this Section nor Section 8.09 is intended
to limit the rate of interest payable for the account of any Bank to the maximum
rate permitted by the laws
14
20
of the State of New York if a higher rate is permitted with respect to such Bank
by supervening provisions of U.S. federal law.
(c) If the amount of interest payable for the account of any Bank on
any interest payment date in respect of the immediately preceding interest
computation period, computed pursuant to Section 2.05(a), would exceed the
maximum amount permitted by applicable law to be charged by such Bank, the
amount of interest payable for its account on such interest payment date shall
be automatically reduced to such maximum permissible amount.
(d) If the amount of interest payable for the account of any Bank in
respect of any interest computation period is reduced pursuant to clause (c) of
this Section and the amount of interest payable for its account in respect of
any subsequent interest computation period, computed pursuant to Section
2.05(a), would be less than the maximum amount permitted by applicable law to be
charged by such Bank, then the amount of interest payable for its account in
respect of such subsequent interest computation period shall be automatically
increased to such maximum permissible amount; provided that at no time shall the
aggregate amount by which interest paid for the account of any Bank has been
increased pursuant to this clause (d) exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to clause
(c) of this Section.
SECTION 2.06. Amendment Fee. The Borrower shall pay to the Agent, for
the account of the Banks ratably in proportion to their respective Loans, (i) on
the Effective Date, an Amendment Fee in an amount equal to .25% of the aggregate
principal amount of the Loans outstanding on such date and (ii) on each of June
30, 1997, September 30, 1997 and December 31, 1997, an amount equal to .25% of
the aggregate amount of the Loans outstanding as of such date (after giving
effect to any repayments or prepayments on such date).
SECTION 2.07. Mandatory Amortization.
(a) The Loans (together with accrued interest thereon) shall be due
and payable according to the following schedule:
Amortization Date Amount
----------------- ------
June 30, 1997 $10,000,000
September 30, 1997 $ 7,000,000
December 31, 1997 $18,000,000
April 1, 1998 $55,000,000
15
21
Each prepayment of the Loans pursuant to Section 2.08 shall reduce the required
amortization payments under this subsection for the next Amortization Date.
(b) The proceeds received by the Borrower from the anticipated $9.5
million tax refund arising from the Borrower's 1996 tax year will be applied,
when received, to prepay the Loans. Such prepayment shall reduce the
amortization payment due on December 31, 1997.
(c) 50% of the Net Cash Proceeds from the Warburg Pincus Transaction
will be applied, when received, to prepay the Loans. Such prepayment shall
reduce the amortization payments required to be made as follows: (i) $10,000,000
shall reduce the remaining 1997 amortization payments on a pro rata basis and
(ii) the balance of the prepayment shall be used to reduce the April 1, 1998
amortization payment.
(d) In addition, in the event that the Borrower shall at any time, or
from time to time, issue Equity Securities, except as contemplated by Section
5.22(a)(i) and 5.22(a)(iv), the Borrower shall prepay the Loans in an amount
equal to 50% of the Net Cash Proceeds thereof. Amounts prepaid pursuant to this
section shall be applied to reduce the scheduled amortization payments in
inverse order of maturity.
(e) The prepayments required by subsection (d) of this Section 2.07
shall be effective on the fifth Business Day after the date of receipt by the
Borrower or any of its Subsidiaries, as the case may be, of the related Net Cash
Proceeds.
SECTION 2.08. Optional Prepayments. (a) The Borrower may, upon at least
one Business Day's notice to the Agent, prepay the Loans in whole at any time,
or from time to time in part in amounts aggregating at least $1,000,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of each of the Banks.
(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.09. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 8.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of
16
22
principal of, or interest on, the Loans shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.
(b) Upon enforcement by the Agent of the Security Documents, the
monies or other assets received by the Agent shall be applied by the Agent in
the following order of priorities:
first, to payment of the expenses of sale or other
realization, including fees and disbursements of counsel, and all
expenses, liabilities and advances incurred or made by the Agent in
connection therewith, and any other unreimbursed expenses for which the
Agent or any Bank is to be reimbursed pursuant to the Financing
Documents;
second, to the ratable payment of accrued but unpaid interest
on the Loans and amendment fees payable hereunder;
third, to the ratable payment of the unpaid principal amount
of the Loans;
fourth, to the ratable payment of all other amounts payable
under the Financing Documents, until all such amounts shall have been
paid in full; and
finally, to payment to the Borrower, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
The Agent may make distributions in cash or in kind or, on a ratable basis, in
any combination thereof.
(c) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
17
23
SECTION 2.10. Computation of Interest and Fees. Interest shall be
computed on the basis of a year of 365 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.11. Withholding Tax Exemption. At least five Business Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Bank, each Bank that is not incorporated under the laws of the
United States of America or a state thereof and that has not already done so
agrees that it will deliver to each of the Borrower and the Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Bank is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes. Each Bank which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Borrower and the Agent additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the Borrower
or the Agent, in each case certifying that such Bank is entitled to receive
payments under this Agreement and the Notes without deduction or withholding of
any United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Amended Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied or waived by all the Banks:
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank a duly executed
Note dated on or before the Effective Date complying with the provisions of
Section 2.03;
18
24
(c) receipt by the Agent of evidence, in form and substance
satisfactory to the Agent, of the fact that on or before the Effective Date all
fees and expenses including any outstanding invoices of Price Waterhouse LLP and
Xxxxx Xxxx & Xxxxxxxx, special counsel to the Agent, and counsel (including
allocations to internal counsel) to individual Banks, and all reasonable
invoiced out-of-pocket expenses of the Banks payable under the Original
Agreement and under Sections 2.06 and 8.03(a) of this Amended Agreement have
been paid in full;
(d) receipt by the Agent of opinions of counsel for the Borrower
substantially in the forms of Exhibits B-1 and B-2 hereto and covering such
additional matters relating to the transactions contemplated hereby as the Agent
or the Required Banks may reasonably request;
(e) receipt by the Agent of an opinion of Xxxxx Xxxx & Xxxxxxxx,
special counsel for the Agent, substantially in the form of Exhibit C hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(f) receipt by the Agent of Consent to this Amended Agreement
substantially in the form of Exhibit D duly executed by each Loan Party (other
than the Borrower) party to a Financing Document;
(g) receipt by the Agent of any requested amendments to, or documents
or instruments under or relating to, the Security Documents;
(h) the fact that, immediately after the effectiveness of this Amended
Agreement, no Default under this Amended Agreement shall have occurred and be
continuing;
(i) the fact that the representations and warranties of the Borrower
contained in this Amended Agreement and of each Loan Party contained in each
Security Document to which such Loan Party is a party shall be true and correct
on and as of the Effective Date;
(j) receipt by the agent of a certificate of the Chief Financial
Officer, stating that on the Effective Date (i) no Default has occurred and is
continuing and (ii) the representations and warranties contained in Article IV
are true and correct in all material respects;
(k) receipt by the Agent of all documents (including, without
limitation, legal opinions) it may reasonably request relating to the existence
of each Loan Party, the corporate authority for and the validity of the
Financing Documents, governmental and
19
25
regulatory approvals with respect to the Financing Documents and any other
matters relevant hereto, all in form and substance satisfactory to the Agent;
and
(l) receipt by the Agent for the account of each Bank of (i) the
Amendment Fee referred to in clause (i) of Section 2.06 and (ii) interest on the
Existing Loans accrued to, but excluding, the Effective Date;
provided that this Amended Agreement shall not become effective or be binding on
any party hereto unless all of the foregoing conditions are satisfied not later
than March 31, 1997.
SECTION 3.02. Effect of Amendment. (a) Subject to the satisfaction of
the conditions set forth in Section 3.01, on the Effective Date the Original
Agreement will be automatically amended and restated in its entirety to read as
set forth herein. On and after the Effective Date the rights and obligations of
the parties hereto shall be governed by this Amended Agreement and any Default
under the Original Agreement resulting from the existence of an event or
condition that does not constitute a Default under this Amended Agreement shall
be deemed to have been cured or waived; provided that the rights and obligations
of the parties hereto under Section 9.03 of the Original Agreement with respect
to the period prior to the Effective Date shall continue to be governed by the
provisions of the Original Agreement.
(b) Each Bank confirms that the principal amount owing to it under the
Existing Agreement is the amount set forth opposite its name on the signature
pages hereof. The Borrower agrees that such principal amounts are owing to the
Banks and ratifies and confirms in all respects its obligations and liabilities
to the Banks and the Agent arising under or evidenced by the Original Agreement
or any of the other Financing Documents, and represents and agrees that such
obligations and liabilities are not subject to any setoff, counterclaim or
defense on the part of any Loan Party.
(c) The Agent shall promptly notify the Borrower and the Banks of the
effectiveness of this Amended Agreement, and such notice shall be conclusive and
binding on all parties hereto.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
20
26
SECTION 4.01. Corporate Existence and Power. Each Loan Party is a
corporation duly incorporated, validly existing and in good standing under the
law of its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except as noted in the footnotes to
Schedule II.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Loan Party of the
Financing Documents to which such Loan Party is a party are within such Loan
Party's corporate powers, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with, any governmental
body, agency or official (except the filing of Uniform Commercial Code financing
statements as contemplated by the Security Documents) and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of any Loan Party or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
any Loan Party or result in the creation or imposition of any Lien on any asset
of any Loan Party (except pursuant to the Security Documents).
SECTION 4.03. Binding Effect. This Amended Agreement constitutes a
valid and binding agreement of the Borrower; the Notes constitute valid and
binding obligations of the Borrower; and the Security Documents constitute valid
and binding agreements of the Loan Parties party thereto, in each case
enforceable in accordance with the respective terms thereof.
SECTION 4.04. Financial Information. (a) The unaudited consolidated and
consolidating balance sheets of the Borrower and its Consolidated Subsidiaries
as of December 31, 1996, and the related statements of earnings, stockholder's
equity and cash flows for the fiscal year then ended, copies of which have been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the financial position of the Borrower and its
Consolidated Subsidiaries as of such date and the results of operations and cash
flow for such fiscal year.
(b) The Convention Statement of CHLIC for the fiscal year ended
December 31, 1996 in the form submitted to the Texas Insurance Department, a
copy of which has been delivered to each of the Banks, fairly presents, in
conformity with statutory accounting practices, the financial position of CHLIC
as of such dates and its results of operations and cash flows for the period
then ended.
(c) Since December 31, 1996 there has been no material adverse change
in the business, financial position, results of operations or prospects of the
Coventry Group, considered as a whole.
21
27
SECTION 4.05. Litigation. Except as reported in the draft of the
Borrower's 1996 annual report to the Securities and Exchange Commission, on Form
10-K delivered to each of the Banks prior to the date hereof, there is no
action, suit or proceeding pending against, or to the knowledge of the Borrower
threatened against or affecting, any Loan Party before any court or arbitrator
or any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, financial position or results of operations of the Coventry Group or
which in any manner draws into question the validity of the Financing Documents
or any other documents to be delivered pursuant thereto.
SECTION 4.06. Compliance with Laws. The Borrower and its Subsidiaries
are in compliance in all material respects with all applicable laws, rules and
regulations, other than such laws, rules and regulations (i) the validity or
applicability of which the Borrower or such Subsidiary is contesting in good
faith or (ii) failure to comply with which cannot reasonably be expected to have
a material adverse effect on the business, financial position, results of
operations or prospects of the Borrower and its Subsidiaries, taken as a whole.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any required
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could reasonably be expected to result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.08. Taxes. Each of the Borrower, the other Loan Parties and
CHLIC has filed all United States Federal income tax returns and all other
material tax returns which are required to be filed by it and has paid all taxes
due pursuant to such returns or pursuant to any assessment received by the
Borrower or CHLIC, as the case may be. The charges, accruals and reserves on the
books of the Borrower or CHLIC, as the case may be, in respect of taxes or other
governmental charges are, in the opinion of the Borrower, adequate.
SECTION 4.09. Regulatory Matters. Without limiting the generality of
Section 4.01,
22
28
(i) CHLIC (y) is a stock life insurance corporation duly
organized, validly existing and in good standing under the law of the
State of Texas and (z) has the corporate power and authority, and is
duly qualified and in good standing as a foreign corporation, and has
all requisite licenses and authorizations to do business in all
jurisdictions in which the character of its properties or the nature
of its business requires such qualification or authorization, except
for qualifications and authorizations the lack of which, singly or in
the aggregate, has not materially adversely affected and will not
materially adversely affect CHLIC; and
(ii) each HMO Company is duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation,
(y) holds an unrestricted Certificate of Authority (or equivalent
charter document) issued by the relevant state and/or federal
governmental agencies, (z) has the corporate power and authority, and
is duly qualified and in good standing as a foreign corporation, and
has all requisite licenses and authorizations to do business in all
jurisdictions in which the character of its properties or the nature
of its business requires such qualification or authorization, except
for the qualifications or authorizations the lack of which, singly or
in the aggregate, has not materially adversely affected and will not
materially adversely affect such HMO Company.
SECTION 4.10. Not an Investment Company. No Loan Party is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.11. Full Disclosure. All information heretofore furnished by
or on behalf of any Loan Party to the Agent or any Bank for purposes of or in
connection with the Financing Documents or any transaction contemplated thereby
was, and all such information hereafter furnished by or on behalf of any Loan
Party to the Agent or any Bank will be, true and accurate in every material
respect on the date as of which such information is stated or certified. In all
such information furnished to the Agent or any Bank no Loan Party has omitted,
and no Loan Party will omit in the future, any material fact necessary in order
to make such information not false or misleading. The Borrower has disclosed to
the Banks in writing any and all facts which materially and adversely affect or
may affect (to the extent the Borrower can now reasonably foresee), the
business, operations or financial condition of the Loan Parties, taken as a
whole, or the ability of the Loan Parties to perform their obligations under
this Agreement.
SECTION 4.12. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Coventry Group, in the
course of which it identifies and evaluates associated liabilities and costs
(including, without limitation, any capital or operating expenditures required
for clean-up or closure of properties presently or previously owned or operated,
any capital or operating expenditures required to achieve or maintain compliance
with environmental protection standards imposed by law
23
29
or as a condition of any license, permit or contract, any related constraints on
operation activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of this
review, the Borrower has reasonably concluded that Environmental Laws are
unlikely to have a material adverse effect on the business, financial condition,
results of operation or prospects of the Coventry Group.
SECTION 4.13. No Default. No Default has occurred and is continuing and
no Loan Party is in default under or with respect to any material contract,
agreement, lease or other instrument to which it is a party or by which its
property is bound or affected.
SECTION 4.14. No Burdensome Restrictions. No contract, lease, agreement
or other instrument to which any Loan Party is a party or by which any of its
property is bound or affected, no charge, corporate restriction, judgment,
decree or order and no provision of applicable law or governmental regulation is
reasonably likely to have a material adverse effect on the business, operations,
properties, prospects or condition (financial or otherwise) of the Coventry
Group, taken as a whole.
SECTION 4.15. Use of Tradename. Members of the Coventry Group have
the perpetual right to use the name "HealthAmerica" in the States of
Pennsylvania, Missouri, Illinois and West Virginia.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any amount payable under any Note
remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, consolidated and consolidating balance
sheets of the Borrower and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated and consolidating statements of
earnings, stockholders' equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all audited (except as to consolidating statements) without material
qualification by Xxxxxx Xxxxxxxx & Co. or other independent public accountants
of nationally recognized standing;
24
30
(b) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Borrower,
consolidated and consolidating balance sheets of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of earnings and cash flows for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter, setting
forth in each case in comparative form the figures for the corresponding quarter
and the corresponding portion of the Borrower's previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency by the
chief financial officer or the chief accounting officer of the Borrower;
(c) as soon as available and in any event (i)(A) within 30 days after
the end of each month after May 1997 that is not the last month of a fiscal
quarter of the Borrower, and (B) within 45 days after the end of each other
month that is the last month of a fiscal quarter, a "Monthly Information
Package" as described on Schedule III, (ii) by March 31, 1997, all monthly
reports and certificates required under the Original Agreement with respect to
January and February 1997 and (iii) within 30 days after the end of April and
May 1997, uncertified consolidated and consolidating balance sheets and income
statements of the Borrower and its Consolidated Subsidiaries at the end of, and
for, such month;
(d) simultaneously with the delivery of each set of financial
statements referred to in clauses (a), (b) and (c) above, a certificate of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.07 to
5.21, inclusive (except that the status of compliance with 5.11 and 5.17 shall
be required to be covered only in the certificate delivered following the end of
the applicable fiscal quarter) on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(e) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i) as to
whether anything has come to their attention to cause them to believe that any
Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to clause (d) above;
(f) as soon as available and in any event within 45 days after the end
of each fiscal quarter of the Borrower, a quarterly analysis of any variances
from the budget set forth in the Business Plan;
25
31
(g) as soon as available (i) and in any event within 120 days after the
end of each fiscal year of each HMO Company, the annual financial statements of
such HMO Company for such year as submitted to the applicable state regulatory
authority or the United States Secretary of Health and Human Services and (ii)
any other formal written financial report regarding such HMO Company provided to
the applicable state regulatory authority or the United States Secretary of
Health and Human Services;
(h) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, a schedule setting forth in reasonable
detail the reinsurance arrangements maintained, as required by Section 5.03(c),
by each HMO Company as of the end of the preceding fiscal year (with any changes
subsequent to the end of such fiscal year described therein);
(i) as soon as available and in any event within 120 days after the end
of each fiscal year of CHLIC, the Convention Statement of CHLIC for such fiscal
year, in the form submitted to the Texas Insurance Department;
(j) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, (i) a report in form and scope reasonably
satisfactory to the Agent on CHLIC's health insurance reserves as of the end of
the preceding fiscal year, which has been prepared by CHLIC and reviewed by an
independent actuarial or accounting firm acceptable to the Required Banks and
(ii) a schedule setting forth in reasonable detail the reinsurance arrangements
maintained, as required by Section 5.03(d), by CHLIC as of the end of the
preceding fiscal year (with any changes subsequent to the end of such fiscal
year described therein);
(k) forthwith upon the receipt thereof by CHLIC, any written
communication from the Texas Insurance Department which directly questions in
any material respect the fiscal soundness of CHLIC;
(l) within 30 days of the Agent's request, a report in form and scope
satisfactory to the Agent of the adequacy of reserves of any Loan Party or of
any other matter the Agent may deem reasonably necessary, prepared by an
independent actuarial or accounting firm acceptable to the Required Banks;
provided that any particular type of report shall not be requested more than
once during each fiscal year;
(m) forthwith after the receipt thereof by the Borrower or any of its
Subsidiaries, (y) any written communication from any relevant state governmental
agencies which directly questions in any material respect the compliance of any
HMO Company with any applicable laws or regulations or directly questions in any
material respect the financial soundness of any HMO Company or any of its
Subsidiaries or the adequate provision by any HMO Company or any of its
Subsidiaries against risk of insolvency or revokes (or threatens or commences
any action or evidences any intention to revoke) any HMO
26
32
Company's Certificate of Authority (or equivalent charter document) or any other
license, authorization or approval necessary for any such Company to conduct its
business as conducted on the date hereof or (z) any written communication from
the United States Health Care Financing Administration or the United States
Office of Prepaid Health Care which directly questions in any material respect
the compliance of any HMO Company with any applicable laws or regulations or
directly questions in any material respect the fiscal soundness of any HMO
Company or the adequate provision any HMO Company against risk of insolvency or
revokes (or threatens or commences any action or evidences any intention to
revoke) any HMO Company's status as a federally qualified health maintenance
organization;
(n) forthwith upon the occurrence of any Default, a certificate of the
chief financial officer or the chief accounting officer of the Borrower setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(o) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(p) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which any Loan Party shall have filed with the Securities and
Exchange Commission;
(q) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might reasonably be expected to
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA, or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Internal Revenue Code, a copy
of such application; (v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information filed with
the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063
of ERISA, a copy of such notice; or (vii) fails to make any required payment or
contribution to any Plan or Multiemployer Plan or any material required payment
or contribution in respect of any Benefit Arrangement or makes any amendment to
any Plan or Benefit Arrangement which has resulted or could result in the
imposition of a Lien or the posting of a bond or
27
33
other security, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth details as to such occurrence
and action, if any, which the Borrower or applicable member of the ERISA Group
is required or proposes to take;
(r) as soon as reasonably practicable after an executive officer of the
Borrower obtains knowledge of the commencement of, or of a threat (with respect
to which there is a reasonable possibility of assertion) of the commencement of,
an action, suit or proceeding against any Loan Party before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could be expected to have a
material adverse effect on the Coventry Group, considered as a whole, or which
in any manner questions the validity of any Financing Document or any of the
transactions contemplated thereby, information as to the nature of such pending
or threatened action, suit or proceeding;
(s) forthwith upon the occurrence of any material adverse change in the
business of any Loan Party, written notice from the chief financial officer or
the chief accounting officer of the Borrower setting forth the details thereof;
(t) immediately upon commencement thereof, notice of commencement of
any action or proceeding by any Commissioner, Department, Secretary or Board
described in clause (y) of Section 6.01(m) seeking to impose or effect, as the
case may be, any fine, restriction, suspension, revocation or termination
described in such clauses; and
(u) from time to time such additional information regarding the
financial position or business of the Coventry Group as the Agent, at the
request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each other Loan Party to pay and discharge, at or
before maturity, all their respective material obligations (monetary or
otherwise) and liabilities, including, without limitation, tax liabilities,
except where the same may be contested in good faith by appropriate proceedings,
and will maintain, and will cause each other Loan Party to maintain, in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each other Loan Party to keep, all property useful
and necessary in its business in good working order and condition.
(b) The Borrower will maintain, and will cause each other Loan Party to
maintain, (either in the Borrower's or in such other Loan Party's own name),
insurance policies against such risks, in at least such amounts and upon such
terms as are set forth in
28
34
Schedule I; provided that the Borrower shall not be required to maintain
insurance specified in the preceding clause if an independent insurance broker,
agent or other representative reasonably satisfactory to the Required Banks
shall certify to the Banks that such requirement with respect to such insurance
cannot be complied with in a recognized insurance market of the United States or
of any other country by reason of the unavailability to companies of established
repute engaged in the same or similar business with respect to one or more risks
so required to be insured against. The Borrower may replace any insurance
company named in Schedule I with an Acceptable Insurer, and may decrease the
amount of insurance not constituting self-insurance carried with the consent of
the Required Banks. Each Loan Party may self-insure for professional and general
liability claims, including, without limitation, workers compensation, so long
as such Loan Party shall maintain reserves which are, in the opinion of the
Borrower, adequate and consistent with the most recent actuarial report prepared
for such Loan Party (pursuant to Section 5.01 of this Agreement, if an actuarial
report has been made available under such Section). The Borrower will furnish to
the Banks (i) upon request of any Bank through the Agent from time to time, full
information as to the insurance carried, (ii) within five days of receipt of
notice from any insurer, a copy of any notice of cancellation or material change
in coverage from that existing on the date of the Original Agreement, and (iii)
forthwith, notice of any cancellation or nonrenewal of coverage by any Loan
Party.
(c) The Borrower will cause each HMO Company to maintain reinsurance
arrangements with respect to their respective businesses in force consistent
with its historical practices with (i) CHLIC, (ii) other reinsurers which are
rated "A-" or better by A.M. Best Company or affiliates of reinsurers so rated,
(iii) underwriters at Lloyd's of London or any syndication led by Lloyd's of
London or (iv) other reinsurers approved by the Required Banks; provided that
the Borrower shall not be required to maintain reinsurance specified in the
preceding clause if an independent insurance broker, agent or other
representative reasonably satisfactory to the Required Banks shall certify to
the Banks that such requirement with respect to such insurance cannot be
complied with in a recognized insurance market of the United States or of any
other country by reason of the unavailability to companies of established repute
engaged in the same or similar business with respect to one or more risks so
required to be insured against.
(d) The Borrower will cause CHLIC to maintain reinsurance arrangements
consistent with its historical practices with reinsurers which are rated "A-" or
better by A.M. Best Company or affiliates of reinsurers so rated or underwriters
at Lloyd's of London or any syndication led by Lloyd's of London or other
reinsurers otherwise approved by the Required Banks.
SECTION 5.04. Conduct of Business, Maintenance of Existence and
Ownership of Subsidiaries. (a) Subject to Section 5.22, the Borrower will renew
and keep in full force
29
35
and effect, and will cause each Loan Party to preserve, renew and keep in full
force and effect their respective corporate existences and all material
governmental licenses, authorizations, consents and approvals, rights,
privileges and franchises necessary or desirable in the normal course of
business.
(b) The Coventry Group will not engage in any business activities to
any significant extent other than the following: (i) by CHLIC, the accident and
health insurance business as conducted by CHLIC as of the date hereof and
activities incidental or related thereto (ii) by CHLIC, the accident and health
insurance business as it relates to clause (iii) hereof, and (iii) the provision
and administration of healthcare services through healthcare providers and
activities incidental or related thereto and consistent therewith including the
health indemnity, HMO and preferred provider organization business.
(c) Subject to Section 5.22, the Borrower will at all times directly
own 100% of the capital stock of CHC Financial and CHLIC, and all such stock
shall be pledged pursuant to the Coventry Pledge Agreement. The Borrower will at
all times directly own 100% of the capital stock of each of CHMC, GHP, PGC,
CHMC-VA, HCUSA and all such stock shall be pledged pursuant to the Coventry
Pledge Agreement. CHC Financial will at all times directly own 100% of the
capital stock of Coventry Healthcare Physician Management, Inc., Coventry
Healthcare Properties, Inc., CHP and Pennsylvania Healthcare USA, Inc., and all
such stock shall be pledged pursuant to the Guaranty and Security Agreement.
(d) PGC or CHC Financial will at all times directly own, 100% of the
capital stock of HealthAmerica and Healthpass. All stock of HealthAmerica and
Healthpass shall be pledged pursuant to the Guaranty and Security Agreement.
(e) Schedule II lists all Subsidiaries of the Borrower as of the date
hereof and as of the Effective Date and indicates the company owning each
Subsidiary. None of PGMA, any insurance company or any HMO Company shall have
any Subsidiary, except that (i) HealthAmerica may own all of the capital stock
of Medical Center HPJV, Inc., (ii) Medical Center HPJV, Inc. may own all of the
capital stock of Riverside Health Plan, Inc., (iii) HCUSA may own all of the
capital stock or ownership interests of HCUSA-MO, HCUSA-Midwest, HCUSA-OH and
HCUSA-AL, and (iv) GHP may own all of the capital stock of SSM, subject in each
case to the requirements set forth in the last sentence of this paragraph (e).
The Borrower will cause (x) each Person (other than (A) a statutory insurance
company or regulated health maintenance organization and (B) Persons in the
process of becoming regulated health maintenance organizations, provided no
Person may be excluded pursuant to this clause (B) from the requirements
otherwise imposed by this sentence for a period of more than six months
following the date of organization or acquisition of such Person) that shall, at
any time after the date hereof,
30
36
become a Subsidiary of any Loan Party, to enter into the Guaranty and Security
Agreement as a new "Pledgor", and to take all steps necessary to perfect the
security interests contemplated thereby and (y) all of the capital stock of each
Person that shall, at any time after the date hereof, become a Subsidiary of any
Loan Party to be pledged pursuant to the Coventry Pledge Agreement or the
Guaranty and Security Agreement, in each case not later than the date on which
such event occurs; provided that a new Subsidiary shall not be required pursuant
to clause (x) of this paragraph (e) to become party, as a new "Pledgor", to the
Guaranty and Security Agreement so long as the requirement set forth in the next
succeeding sentence and the requirement set forth in clause (y) of this
paragraph (e) are met. In no event shall the aggregate book value of assets of
PGMA and all Subsidiaries (other than (A) statutory insurance companies and
regulated health maintenance organizations and (B) Persons in the process of
becoming regulated health maintenance organizations, provided no Person may be
excluded pursuant to this clause (B) from the requirements otherwise imposed by
this sentence for a period of more than six months following the date of
organization or acquisition of such Person) not party as a "Pledgor" to the
Guaranty and Security Agreement exceed $1,000,000.
(f) Each Loan Party shall maintain adequate contracts, leases and
agreements with providers (including, without limitation, physicians, physician
groups, hospitals and other health care facilities) necessary in the normal
course of business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and will
cause each other Loan Party to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, regulatory filing
requirements, Environmental Laws and ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each other Loan Party to keep, proper books of record
and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each other Loan Party to permit, representatives of any
Bank at such Bank's expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired. Each Loan Party
will at all times retain an accounting firm of nationally recognized standing
acceptable to the Required Banks as the auditors of such Loan Party. The fiscal
year of the Coventry Group will at all times be the calendar year.
31
37
SECTION 5.07. Debt. (a) Subject to Section 5.22, the Borrower will
not create, assume or suffer to exist any Debt, other than (i) the Loans, (ii)
Debt secured by Liens permitted under Sections 5.10(b), (c) and (f), (iii) Debt
to a Loan Party which is not an HMO Company or CHLIC evidenced by an instrument
duly delivered and pledged to the Agent pursuant to the Security Documents, and
(iv) the Convertible Exchangeable Subordinated Debt.
(b) The Borrower will not permit any other Loan Party to create,
assume or suffer to exist any Debt, other than (i) Debt secured by Liens
permitted under Sections 5.10(b), (c) and (f), (ii) Debt owed by PGC in the
principal amount not exceeding $1,762,000 to the United States Department of
Health and Human Services, (iii) Debt owed by any Loan Party which is not an HMO
Company or CHLIC to another Loan Party which is not an HMO Company or CHLIC
evidenced by an instrument duly delivered and pledged to the Agent pursuant to
the Security Documents, (iv) Debt to the Borrower in the form of surplus notes
from an HMO Company, so long as the requirements of 5.09 are met and (v) Debt
incurred or assumed pursuant to Section 5.07(b)(viii) of the Original Agreement,
not in excess of $2,000,000.
SECTION 5.08. Restricted Payments; No Cash Payment of Subordinated
Debt. (a) Subject to Section 5.22, no Loan Party will declare or make any
Restricted Payment other than any Restricted Payment made:
(i) to the Borrower (directly or indirectly by payment through a
Subsidiary) by any other Loan Party;
(ii) as annual dividends from HealthAmerica to PGC to the extent
necessary to permit PGC to repay, simultaneous with the payment of
such annual dividends, an amount owed by PGC to HealthAmerica pursuant
to an intercompany balance between PGC and HealthAmerica for such
fiscal year; or
(iii) as annual dividends from HealthAmerica to PGC to the extent
necessary to permit PGC to repay the Borrower amounts outstanding
under the notes described in Sections 5.07(b)(ii) and (vii) hereof,
provided, that simultaneously with the payment of such dividends, PGC
shall use such moneys solely to repay such outstanding amounts to the
Borrower;
provided that no Restricted Payment may be made by any Loan Party under clause
(ii) above if any Default then exists or if, after giving effect to such
Restricted Payment, a Default would exist.
(b) Subject to Section 5.22, no Loan Party will make any payment of
principal of, or interest on or optionally redeem or purchase or otherwise
optionally acquire or
32
38
defease or otherwise provide in advance for the payment of, the Convertible
Exchangeable Subordinated Debt, other than the payment of interest through the
issuance of notes evidencing increases of the principal amount thereof or the
conversion or exchange of the Borrower's Convertible Exchangeable Subordinated
Debt for the Borrower's common or preferred stock in accordance with the terms
of the Convertible Exchangeable Subordinated Debt.
(c) The Borrower will cause each other Loan Party (other than CHLIC)
to pay the Borrower (directly or indirectly by payment through a wholly-owned
Subsidiary), as and when available or permitted, dividends in amounts necessary
(in the event sufficient funds are not available from other sources) from time
to time to service the repayment of the principal and interest on the Loans for
such fiscal year. The Borrower shall not permit any Loan Party (except CHLIC,
solely to the extent required by any regulatory authority) to be a party to any
agreement containing, or otherwise consent to, any contractual restriction on
its ability to make any Restricted Payment to the Borrower (directly or
indirectly through a Subsidiary).
SECTION 5.09. Investments. (a) Subject to Section 5.22, no Loan
Party will make or hold any Investments other than:
(i) solely with respect to CHLIC or an HMO Company (x)
Investments in Admitted Assets and (y) Investments in Non-Admitted
Assets in an aggregate amount at no time exceeding the amount
permitted by applicable state law;
(ii) Investments in Persons which are Loan Parties on the
Effective Date; provided that such Investments shall be evidenced by
securities or instruments pledged pursuant to the Security Documents,
and provided further that no capital contributions or loans shall be
made to any HMO Company that has net worth in excess of 2% of premiums
unless requested in writing by the applicable state regulatory agency
or otherwise required by applicable law; and
(iii) Temporary Cash Investments.
The foregoing notwithstanding, no Loan Party will make any Investment
in any Affiliate.
(b) Subject to Section 5.22, the Borrower will ensure that (i) no
Subsidiary that is an HMO will, without the prior written consent of the
Required Banks, (x) seek to be exempted by the applicable state Insurance
Department or by the federal government from, respectively, the provisions of
such state or federal insurance and health maintenance organization laws and
regulations thereunder or (y) seek any exemption or waiver from restrictions on
investments contained in such state's or federal insurance or
33
39
health maintenance organization laws and regulations thereunder, (ii) CHLIC (x)
will not, without the prior written consent of the Required Banks, seek to be
exempted by the Texas Insurance Department from provisions of the Texas
Insurance Code and regulations thereunder and (y) will not, pursuant to the
provisions of the Texas Insurance Code, seek any exemption or waiver from
restrictions on investments contained in the Texas Insurance Code.
SECTION 5.10. Negative Pledge. No Loan Party will create, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired by it,
except:
(a) Liens created pursuant to the Security Documents;
(b) Liens on Temporary Cash Investments owned by a Loan Party securing
such Loan Party's obligations under repurchase agreements; provided that (i) in
no event shall (x) the Loan Party have received less than 95% of the fair market
value (including accrued interest) of the Temporary Cash Investments subject to
such repurchase agreement or (y) the obligation of the Loan Party under a
repurchase agreement exceed 105% of the fair market value of such Temporary Cash
Investments as of the time such repurchase agreement is entered into; and (ii)
the term of any such repurchase agreement shall not exceed 90 days;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that (i) such Lien attaches to such asset concurrently with or within
90 days after the acquisition thereof and (ii) the aggregate principal amount of
such Debt at any time outstanding shall not exceed $5,000,000;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) Liens (in addition to those permitted by clauses (c), (d) and (e)
above) on equipment securing capital lease obligations with respect to such
equipment in an aggregate amount for the Coventry Group (as set forth, or as
would be set forth, on a balance sheet of the lessee) not to exceed at any time
$6,000,000;
(g) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any obligations
in an aggregate
34
40
amount exceeding $2,000,000 and (iii) do not in the aggregate materially detract
from the value of its assets or materially impair the use thereof in the
operation of its business; and
(h) certain time-put options to receive GHP stock which are set forth
in Section 2.8 of the lease dated November 21, 1988 between Healthline
Management, Inc. ("Healthline"), as landlord, and GHP, as tenant, relating to
3908 South Grand and Section 2.8 of the lease dated November 21, 1988 between
Healthline, as landlord, and GHP, as tenant, relating to 0000 Xxxxx Xxxxxxxxx.
SECTION 5.11. Operating Margin. The Borrower's Operating Margin will
not for any period set forth below fall below the percentage set forth below
opposite such period:
Period Margin
------ ------
January 1, 1997 through March 31, 1997 -5.1%
January 1, 1997 through June 30, 1997 -2.0%
January 1, 1997 through September 30, 1997 -0.1%
January 1, 1997 through December 31, 1997 0.9%
SECTION 5.12. Consolidations, Mergers and Sales of Assets. Subject to
Section 5.22, no Loan Party will (a) consolidate or merge with or into any other
Person (except for a merger of a Subsidiary of the Borrower (which is not a
statutory insurance company or a health maintenance organization) into the
Borrower or (b) engage in an Asset Sale.
SECTION 5.13. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower to refinance the Existing Loans.
None of the proceeds of the Loans will be used, directly or indirectly, (a) for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" within the meaning of Regulation U or (b) to finance
any acquisition of a corporation.
SECTION 5.14. Subordinated Debt and Equity Securities. Subject to
Section 5.22, the Borrower will not consent to, and will not permit any Loan
Party to consent to, any amendment to, or waiver of any provision of, any
instrument or agreement evidencing or governing any Subordinated Debt of any
Loan Party or any preferred stock of any Loan Party or prepay any Subordinated
Debt of any Loan Party. The Borrower shall not issue any preferred stock having
any mandatory redemption feature unless the provisions of such mandatory
redemption feature are in form and substance satisfactory to the Agent and the
Required Banks. No Loan Party, other than the Borrower, shall issue any Equity
Securities to any Person other than a Loan Party.
35
41
SECTION 5.15. Transactions with Affiliates. Except as expressly
permitted by this Agreement, no Loan Party will, directly or indirectly: (i)
transfer, sell, lease, assign or otherwise dispose of any assets to an
Affiliate; (ii) merge into or consolidate with or purchase or acquire assets
from an Affiliate; or (iii) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, Guarantees of obligations of an Affiliate); provided that (a) any
Affiliate who is an individual may serve as a director, officer or employee of
any Loan Party and receive reasonable compensation for his or her services in
such capacity and (b) any Loan Party may enter into any transaction with an
Affiliate providing for the leasing of property, the rendering or receipt of
services, the purchase or sale of inventory and other assets in the ordinary
course of business of such Loan Party if the monetary or business consideration
arising therefrom would be substantially as advantageous to such Loan Party as
the monetary or business consideration which would be obtained in a comparable
arm's length transaction with a Person not an Affiliate.
SECTION 5.16. Other Agreements. Subject to Section 5.22, no Loan Party
will consent to any modification, supplement or waiver of any of the provisions
of the PGMA Option Agreement or the charter of any Loan Party in any material
respect without the prior written consent of the Agent (with the approval of the
Required Banks), it being understood that any modification, supplement or waiver
of any such agreement or document which affects the amount or timing of any
payment by or to any such Loan Party thereunder shall be deemed material for
purposes hereof. Each Loan Party shall perform its obligations under the
aforesaid agreements or documents, and shall enforce the obligations of the
other parties thereto.
SECTION 5.17. Capital Requirements. On any date the statutory capital
and surplus of any subsidiary that is an HMO Company or CHLIC will be no less
than 1.25 times the applicable state requirement.
SECTION 5.18. Minimum Net Worth. Net Worth will at no time be less than
the Net Worth Floor. "Net Worth Floor" means $83,000,000 plus 100% of the gain
recognized on the AHERF Transaction and BJC Transaction, plus 50% of the
cumulative consolidated net earnings of the Borrower and its Consolidated
Subsidiaries for each fiscal quarter of the Borrower ended after the Effective
Date for which there are consolidated net earnings and not a consolidated net
(loss) plus 100% of the increase in Net Worth attributable to any issuance after
December 31, 1996 of capital stock, whether common or preferred, of the
Borrower, including without limitation any shares of capital stock issued on
conversion of any Debt.
SECTION 5.19. Acquisitions. Neither the Borrower nor any Subsidiary
will consummate or agree to consummate any Acquisition.
36
42
SECTION 5.20. Tax Refund. The Borrower will file with the Internal
Revenue Service its refund claim of approximately $9.5 million arising from its
1996 tax year, by May 31, 1997.
SECTION 5.21. Adoption of Management Incentive Plan. The Borrower
shall, by all required corporate action, adopt a management incentive plan
reasonably satisfactory to the Banks by May 1, 1997.
SECTION 5.22. Certain Transactions Permitted.
Notwithstanding Sections 5.04(a), 5.04(b), 5.07(a), 5.08(b), 5.09,
5.12, 5.14, 5.16, 6.01(b) and 6.01(m), the Borrower may:
(a)(i) complete the Warburg Pincus Transaction;
(ii) complete the AHERF Transaction and the BJC Transaction;
(iii) consummate the merger of of HCUSA-MO and GHP; and
(iv) take such corporate action as is necessary to (a) authorize
the issuance of additional shares of the Borrower's common stock, (b)
sell such shares to CHLIC for a price not exceeding $5,000,000 and (c)
cause CHLIC to take such action as is necessary to complete such stock
acquisition;
(b) subject to the prior written approval of the Required
Banks, consummate a corporate reorganization consisting of one or more of the
following elements:
(i) merging HealthAmerica into Riverside and merging CHWP into
the company surviving such merger;
(ii) re-domesticating the Borrower as a Tennessee corporation
through a merger with a wholly-owned subsidiary incorporated in
Tennessee that has no liabilities prior to such merger;
(iii) contributing the stock and surplus notes of CHDC, PGC,
CHMC, CHMC-VA, GHP, SHMC and HCUSA to CHC Financial, so long as such
contribution is expressly subject to the Lien of the Agent on such
stock and surplus notes, and such stock and surplus notes are pledged
to the Agent pursuant to the Guaranty and Security Agreement;
37
43
(iv) capitalizing CHC Financial with up to $500,000 and causing
CHC Financial to provide loans to the Coventry Group to fund operating
activities and satisfy capital requirements within the limitations set
forth in Section 5.09(a)(ii); provided that instruments evidencing
such loans are pledged pursuant to the Guaranty and Security
Agreement; and
(v) discontinuing or selling the Florida Medicaid operations of
HCUSA.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. Subject to Section 5.22, if one or
more of the following events ("Events of Default") shall have occurred and be
continuing:
(a) the Borrower shall fail to pay (i) when due any principal of any
Loan or (ii) within three days of the due date thereof, any interest on any
Loan, any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.07 to 5.21, inclusive;
(c) any Loan Party shall fail to observe or perform any covenant or
agreement (i) contained in Section 5.01 for 5 days or (ii) contained in any
other section of the Financing Documents (other than those covered by clause (a)
or (b) above) for 30 days, in either case after notice thereof has been given to
the Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
any Loan Party in the Financing Documents or in any certificate, financial
statement or other document delivered pursuant hereto or thereto shall prove to
have been incorrect in any material respect when made (or deemed made);
(e) any Loan Party shall fail to make any payment in respect of any
Material Debt when due or within any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder(s) of
Material Debt or any Person acting on such holders' behalf to accelerate the
maturity thereof;
38
44
(g) any Loan Party shall commence a voluntary case or other proceeding
seeking liquidation, reorganization, rehabilitation or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, conservator or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced against
any Loan Party seeking liquidation, reorganization, rehabilitation or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian, conservator or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against any Loan Party under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $250,000 which it shall have become liable
to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could reasonably be expected to cause one or more members of the ERISA Group to
incur a current payment obligation in excess of $2,000,000;
(j) one or more judgments or orders for the payment of money in excess
of $2,000,000 in aggregate shall be rendered against any Loan Party and such
judgments or orders shall continue unsatisfied and unstayed for a period of 10
days;
(k) (i) except as provided for in the Warburg Pincus Transaction, any
person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, as amended) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 25% or more of the outstanding shares of
common stock of the Borrower or (ii) during
39
45
any period of 12 consecutive calendar months, less than a majority of the board
of directors of the Borrower shall consist of individuals who were directors of
the Borrower on the first day of such period;
(l) any insurance commissioner or any other state or federal insurance
or health maintenance organization regulatory official intervenes in the
management of the business of any Loan Party or initiates any proceeding or
investigation with a view toward intervening in the management of the business
of any Loan Party;
(m) (i) any Loan Party ceases to be duly qualified and have all
material authorizations, qualifications, licenses, certificates and permits,
including licenses, certificates and permits of health and insurance commissions
and agencies of the states in which it operates to conduct its business as now
being conducted or (ii) without limiting the generality of the foregoing, (x)
any subsidiary that is an HMO Company ceases to be a federally-qualified health
maintenance organization or any action or proceeding is commenced to revoke,
restrict, suspend or terminate such subsidiary's status as a federally-qualified
health maintenance organization, and (y) any applicable state department of
insurance or department of health imposes a material fine against such
subsidiary or its Certificate of Authority or any other license, authorization
or approval necessary for such subsidiary to conduct its business as conducted
on the date hereof is restricted or suspended, or such state department of
insurance or health commences any action or proceeding to revoke or terminate
any such license, authorization or approval, or such subsidiary ceases for any
reason to be the holder of an unrestricted Certificate of Authority issued by
such state;
(n) any event or condition shall occur which has or could reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of the Borrower and its Consolidated Subsidiaries,
taken as a whole; provided that this clause (n) shall cease to be of any effect
upon the receipt by the Borrower of the Net Cash Proceeds derived from the
Warburg Pincus Transaction and by the Agent of the portion thereof to be paid to
it for the account of the Banks pursuant to Section 2.07(c); or
(o) any security interests granted or purported to be granted under any
Security Document shall fail for any reason to be valid and perfected security
interests having a first priority (subject only to such other Liens as are
expressly permitted by the Security Documents);
then, and in every such event, the Agent shall if requested by Banks holding
Notes evidencing more than 50% in aggregate principal amount of the Loans, by
notice to the Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower;
40
46
provided that in the case of any of the Events of Default specified in clause
(g) or (h) above with respect to the Borrower, without any notice to the
Borrower or any other act by the Agent or the Banks, the Notes (together with
accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Financing Documents as are delegated to the
Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto. Without limiting the generality of the foregoing,
each Bank irrevocably authorizes the Agent to enter into the Security Documents.
SECTION 7.02. Agent and Affiliates. Xxxxxx shall have the same rights
and powers under this Agreement as any other Bank and may exercise or refrain
from exercising the same as though it were not the Agent, and Xxxxxx and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with any Loan Party or affiliate of any Loan Party as if it
were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent under the
Financing Documents are only those expressly set forth therein. Without limiting
the generality of the foregoing, the Agent shall not be required to take any
action with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request
41
47
of the Required Banks or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with any Financing Document or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of any Loan Party in any Financing Document; (iii) the
satisfaction of any condition specified in Article III, except receipt of items
required to be delivered to the Agent; or (iv) the validity, effectiveness or
genuineness of the Financing Documents or any other instrument or writing
furnished in connection therewith. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Loans, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with the Financing Documents or any action taken
or omitted by such indemnitees thereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of
42
48
this Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent.
SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its
own account a fee in the amounts and at the times previously agreed upon between
the Borrower and the Agent.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Agent, at its address, facsimile number or
telex number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address, facsimile number, or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 8.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 8.03. Expenses; Documentary Taxes; Indemnification. (a) The
Borrower shall pay (i) all out-of-pocket expenses of the Agent and the Banks,
including fees and disbursements of Xxxxx Xxxx & Xxxxxxxx, special counsel for
the Agent and any other counsel for the Agent or any of the Banks (including
reasonable allocations to internal counsel, whether or not they constitute
out-of-pocket expenses), in connection with the preparation and, in the case of
the Agent, administration of the Financing Documents, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket
43
49
expenses incurred by the Agent or any Bank, including fees and disbursements of
counsel (including reasonable allocations to internal counsel), in connection
with such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom. The Borrower shall indemnify each
Bank against any transfer taxes, documentary taxes, assessments or charges made
by any governmental authority by reason of the execution and delivery of this
Agreement or the Notes.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each, an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel (including reasonable allocations to internal counsel,
whether or not they constitute out-of-pocket expenses), which may be incurred by
any Indemnitee in connection with any investigative, administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a party thereto)
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right to
be indemnified hereunder for its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 8.04. Reduced Returns. (a) If any Bank shall have determined
that, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any such law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Bank (or its Parent) as a consequence of such
Bank's obligations hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within 15
days after demand by such Bank (with a copy to the Agent), the Borrower shall
pay to such Bank such additional amount or amounts as will compensate such Bank
(or its Parent) for such reduction.
(b) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to it. A certificate of any Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of
44
50
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 8.05. Set-Offs. (a) Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to any Note held by it which is greater than the proportion received by any
other Bank in respect of the aggregate amount of principal and interest due with
respect to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Notes
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Notes held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank to exercise any right
of set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
(b) The Borrower agrees, to the fullest extent it may effectively do
so under applicable law, that in addition to any rights and remedies of the
Banks provided by law, each Bank shall have the right, without prior notice to
the Borrower (any such notice being expressly waived by the Borrower to the
extent permitted by applicable law) upon any amount becoming due and payable by
the Borrower hereunder, under the Notes (whether at the stated maturity, by
acceleration or otherwise) or any other Financing Document, to set-off and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Bank or any branch or agency thereof to or for the credit or the
account of the Borrower. Each Bank agrees promptly to notify the Borrower and
the Agent after any such set-off and application made by such Bank. Failure by
any Bank to give any notice pursuant to the immediately preceding sentence shall
constitute a breach by such Bank of its obligations as set forth in such
sentence; provided that the failure to give such notice shall not affect the
validity of such set-off and application.
SECTION 8.06. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or
45
51
waiver shall, unless signed by all the Banks, (i) reduce the principal of or
rate of interest on any Loan or any fees hereunder, (ii) postpone the date fixed
for any payment of principal of or interest on any Loan or any fees hereunder,
(iii) release Collateral (as defined in any Security Document) pledged pursuant
to, or release any guaranty under, the Financing Documents, (iv) change the
allocation of payments under Section 2.09, (v) change any of the conditions to
effectiveness set forth in Article III, or (vi) change the percentage of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement or change the definition of
"Required Banks".
SECTION 8.07. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in Loans or any or
all of its Loans. In the event of any such grant by a Bank of a participating
interest to a Participant, whether or not upon notice to the Borrower and the
Agent, such Bank shall remain responsible for the performance of its obligations
hereunder, and the Borrower and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i) or (ii) of Section
8.06 without the consent of the Participant. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit E hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Agent and (so long as no Event of Default has not occurred and is
continuing) the Borrower, which consent shall not be unreasonably withheld;
provided that any assignment must be for an amount not less than $5,000,000, and
if greater in increments of $1,000,000, of the Loans or the entire amount of
such
46
52
Bank's Loans; provided, however, that if an Assignee is a Bank or an
affiliate of such transferor Bank, no such consent shall be required and the
assignment may be for an amount not less than $1,000,000 of the amount of the
Loans. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and obligations of a Bank
as set forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), the transferor Bank, the
Agent and the Borrower shall make appropriate arrangements so that, if required,
a new Note is issued to the Assignee. In connection with any such assignment,
the transferor Bank shall pay to the Agent an administrative fee for processing
such assignment in the amount of $2,000. If the Assignee is not incorporated
under the laws of the United States of America or a state thereof, it shall,
prior to the first date on which interest or fees are payable hereunder for its
account, deliver to the Borrower and the Agent certification as to exemption
from deduction or withholding of any United States federal income tax in
accordance with Section 2.13.
(d) In addition to any assignment permitted under subsection (c)
above, any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to an affiliate of such Bank or a Federal Reserve
Bank. No assignment made pursuant to this subsection (d) shall release the
transferor Bank from its obligations hereunder.
SECTION 8.08. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 8.09. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE BORROWER HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE BORROWER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A
47
53
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE BORROWER, THE AGENT AND THE
BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 8.10. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 8.11. Coventry Security Documents. The Borrower confirms that
its obligations under this Agreement and the Notes constitute "Secured
Obligations" as defined in the Coventry Pledge Agreement and the Coventry
Security Agreement.
SECTION 8.12. Confidentiality. The Agent and each Bank agrees to keep
any information delivered or made available by the Borrower pursuant to this
Agreement confidential from anyone other than persons employed or retained by
such Bank who are engaged in evaluating, approving, structuring or administering
the credit facility contemplated hereby; provided that nothing herein shall
prevent any Bank from disclosing such information (a) to any other Bank or to
the Agent, (b) to Price Waterhouse LLP (so long as it agrees to be bound by this
Section 8.12 to the same extent as if it were a Bank), (c) to any other Person
if reasonably incidental to the administration of the credit facility
contemplated hereby, (d) upon the order of any court or administrative agency,
(e) upon the request or demand of any regulatory agency or authority, (f) which
had been publicly disclosed other than as a result of a disclosure by the Agent
or any Bank prohibited by this Agreement, (g) in connection with any litigation
to which the Agent, any Bank or its subsidiaries or Parent may be a party, (h)
to the extent necessary in connection with the exercise of any remedy hereunder
upon an Event of Default (provided that such disclosure is not in violation of
any Securities and Exchange Commission rule or regulation), (i) to such Bank's
or Agent's legal counsel and independent auditors, and (j) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed Participant or Assignee.
48
54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
COVENTRY CORPORATION
By /s/ Xxxx X. Xxxx
--------------------------------
Title: Chief Financial Officer,
Senior Vice President and
Treasurer
00 Xxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxx
Chief Financial Officer
Senior Vice President
Facsimile number: 000-000-0000
49
55
Principal of Loans
$18,000,000 XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ D. Xxxxx Xxxxxxxxxx
-----------------------------
Title: Vice President
$18,000,000 NATIONSBANK OF TENNESSEE, N.A.
By /s/ Xxxx X. Register
-----------------------------
Title: Vice President
$18,000,000 SUNTRUST BANK, NASHVILLE, N.A.
By /s/ T. Xxxxxxx Xxxxx
-----------------------------
Title: Senior Vice President
$14,400,000 FLEET NATIONAL BANK
By /s/ Xxxxxxx X. X'Xxxxx
-----------------------------
Title: Vice President
By /s/ Xxxxxx Xxxxxxx
-----------------------------
Title: Vice President
$10,800,000 CITICORP USA, INC.
By /s/ Xxxx X. Xxxx
-----------------------------
Title: Vice President
50
56
$7,200,000 MELLON BANK, N.A.
By /s/ Xxxx Xxxxxx
-----------------------------
Title: Vice President
$3,600,000 NATIONSBANK, N.A.
By /s/ Xxxxxxxxxxx X. Xxxxxx
-----------------------------
Title: Vice President
Total Principal Amount
$90,000,000
=================
XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ D. Xxxxx Xxxxxxxxxx
-----------------------------
Title: Vice President
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxxx
Telex number: 177615 MGT UT
Facsimile Number: 000-000-0000
51
